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Sainsbury’s (SBRY) has tabled a £1.3bn cash and shares offer for Argos owner HOME Retail Group (HOME) ahead of today’s 5pm “put-up-or-shut-up” takeover deadline.

The offer is worth about 161.3p per Home Retail share, representing a 63% premium to the group’s closing price on 4 January – the date before the start of the offer period. Home Retail shareholders would also own about 12% of the combined group.

The Home Retail board said in a statement it was willing to recommend the key financial terms of the offer, which is dependant on the sale of Homebase to Australian group Westfarmers, to shareholders.

“Whilst the board of Home Retail Group continues to believe in the prospects for the standalone company, it recognises that the possible offer will provide an attractive opportunity for shareholders to receive a full valuation for their shares, and, through their shareholding in the combined group, also to participate in the value created by the combined group from the transaction.”

The offer statement added that a combination would create a food and non-food retailer of choice for customers, building on the strong heritages of both businesses, and bring together multi-channel capabilities, including digital, store and delivery networks, to provide “fast, flexible and reliable product fulfilment” to store or homes across a range of food and non-food products.

Sainsbury’s said the merger would generate EBITDA synergies of not less than £120m a year by 2019 as it moved Argos stores into its supermarkets when leases expired. However, the deal would result in £140m of costs over three years as Sainsbury’s invested in a store fit-out programme, with about 20% of this capex to be incurred in the first year.

Home Retail’s board has agreed a three-week extension to the deal deadline with the Takeover Panel while due diligence is completed. A firm offer must now be made by 5pm on 23 February.

Shares in Sainsbury’s have risen 0.9% to 246.7p so far this morning, while Home Retail slips 1.2% to 151p.

Morning update

Ocado (OCDO) has increased revenues 16.7% to £1.1bn in the year to 29 November as the number of active customers climbed 13% to 509,000. Pre-tax profits jumped 65.3% to £11.9m – the second consecutive year the online grocer has made a profit. Order volumes grew 16.8% to an average of more than 195,000 a week, but average basket value declined by 2.1% to £109.95 as price deflation bit. Sales from the tie-up with Morrisons reached about £200m in the year, but there was still not word of that much-vaunted first international partnership. Ocado said its confidence in signing a deal remained high. Tim Steiner added: “Our ability to package our unique proprietary technology, including our equipment solution, for retail partners outside the UK through our Ocado Smart Platform is proving to be of great interest to a significant number of retailers. We expect to sign multiple deals in multiple territories in the medium term.”

Listed fresh produce group Total Produce (TOT) has acquired a 65% stake in a California grower, packer and distributor of conventional and organic produce to the retail, wholesale and foodservice sectors in the US and Canada. Progressive Produce was founded in 1967 and today has sales in excess of $ 200m. Total Produce chairman Carl McCann said: “We are delighted to become co-owners in Progressive Produce. This transaction with a leading California produce company further broadens our US operations and is in line with our strategy.”

The City reacted positively to the growth at Ocado, despite no international contract being in sight, with shares increasing 3.7% to 273p. Total Produce also rose 1% to 105p on news of the US acquisition. Elsewhere this morning, Real Good Food slumped another 2.1% to 38.2p; and the FTSE 100 lost another 1.3% to 5,983.4 points, sparking a downward trend in the markets.

Yesterday in the City

Conviviality (CVR) was riding high yesterday as the Matthew Clark acquisition boosted half-year sales 38% to £252m and Christmas trading registered like-for-like growth of 1.1% in the two weeks to 3 January. Quicker-than-expected integration of the wine wholesaler into the group is also forecast to lead to bigger buying synergies in the next two years and a profits upgrade from analysts. Investec raised its target price for the stock from 230p to 245p. Its shares rose 4.1% to 208.1 during trading.

Sainsbury’s (SBRY) shares fell 0.6% to 243.7p ahead of today’s “put-up-or-shut-up” deadline as the City waited expectantly for a firm offer to be tabled for Argos owner Home Retail Group (HOME). The Home Retail stock, however, jumped 12% to 152.9p to get closer to the 160p a share offer expected for the business.

Morrisons (MRW) lost ground, falling 0.4% to 173.8p as it announced another assault in the price war. Tesco (TSCO) also suffered, with a fall of 1.4% to 170.9p. And online rival Ocado (OCDO) slipped 0.3% ahead of this morning’s final results.

Real Good Food (RGD) had an horrendous day with its stock plunging as much as 20% on the back of its second profit warning in a year. Heavy investment in the food group as it restructures following the sale of sugar division Napier Brown last year put short-term pressure on margins and is expected to push full-year profits to lower than expected. The share price finished the day 13.8% down at 38.4p.